London Markets: U.K. stocks fight for direction, struggle to end 4-day losing streak

The U.K.’s main stock index switched between small gains and losses Wednesday, struggling to snap a four-day losing streak as the ongoing turmoil in Turkey’s currency and equity markets showed some signs of stabilization.

Investors were also looking ahead to a round of economic data scheduled to be release in the morning.

How markets are performing

The FTSE 100 UKX, -0.03% fell 0.1% to 7,604.07 after an earlier gain didn’t stick and after dropping 0.4% in Tuesday’s session. Thus far this week, the FTSE is off 0.8%, and it is down 1.9% over the course of August.

The British blue-chip gauge is showing a drop of 1.1% for the year to date.

The pound GBPUSD, -0.0472% was buying $1.2722, essentially unchanged with where it had traded late Tuesday.

What’s moving markets

Investors continued to monitor the currency crisis in Turkey, which many fear could spread and have a negative impact on the European banks that have exposure to the country. There were some signs of stabilization, with the Turkish lira TRYUSD, +4.5046% up 3.7% against the dollar, bringing its week-to-date gain to 4.7%. However, it remains sharply lower of late, having dropped about 20% thus far this month, recently hitting an all-time low.

Volatility should remain elevated, after Turkey raised tariffs on a number of American products, in the latest escalation in tensions between the two countries. U.S. President Donald Trump raised tariffs on Turkish aluminum and steel last week; the latest tariffs from Turkey are in response to those “conscious attacks,” according to a translation of a tweet posted by Fuat Oktay, the country’s vice president.

A round of U.K. economic data could also determine the tone of trading. Reads on both consumer prices and producer prices for July are scheduled for release, as is the latest data on retail sales. The core CPI is seen rising 1.9% from the year-ago period, according to FactSet, while the PPI expected to be up 0.2%. July retail sales are seen rising 3.5% from the year-ago period.

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What are strategists saying?

“Turkey’s president Erdogan is showing no indication of backing down, and it appears he is keen to endure the ‘economic war’ with the US, and this is likely to hang over stocks,” said David Madden, market analyst at CMC Markets UK, in a note.

David Carruthers, head of research at Credit Benchmark, on Tuesday wrote that the risk European banks were facing from the lira were “overblown,” adding, “if you look at the credit quality of European banks, it’s been pretty stable.”

Stocks in focus

GlaxoSmithKline PlcGSK, +1.41% rose 1.3% in early trading. According to Dow Jones Newswires, the company’s subsidiary has reported positive results in its first phase 3 study for an injectable two-drug regimen for the treatment of HIV.